Can a land tax reduce sprawl and strengthen urban economies? The evidence is persuasive though not conclusive. Political economist Henry George first proposed a land value tax over 100 years ago, as a way to eliminate land specualtion and make more land available for production.
Today,some observers hail it as a way to curb sprawl. Current property taxes are based in the value of property, reflecting both the land and structure value, in a proportion determined by local property assessors. Decisions to reinvest or remodel currently result in higher assessment valuations and thus higher taxes. As James Howard Kunstler describes it in Geography of Nowhere:
"Our system of property taxes punishes anyone who puts up a decent building made of durable materials. It rewards those who let existing buildings go to hell. It favors speculators who sit on vacant or underutilized land in the hearts of our cities and towns. In doing so it creates an artificial scarcity of land on the free market, which drives up the price of land in general and encourages even more scattered development, i.e., suburban sprawl…"
Onlya handful of places in the United States tax land much more heavily than buildings. None has instituted a tax only on land, as advocated by Henry George. Among those that tax land heavily are Pittsburgh and a score of towns in Pennsylvania. Pittsburgh’s experience with this split-tax system is inconclusive, but many small towns saw increased construction in their centers after implementing the tax.
Althougha land value tax is likely to increase densities, it must be used hand in hand with zoning laws to curb sprawling development. One hundred years ago cities were organized around a central core with most of the public investment concentrated in a relatively small area. Land values were determined by locational benefits with land near the core being more valuable. But the value of the core has changed as the economy has changed. Freeways now roam through rural areas and skim the edges of cities and towns. Without the restraint of zoning policies, there are many enhanced commercial opportunities and higher corresponding land values along freeways. But do we really want the seemingly unending commercial strips that would then result? Zoning can be used to determine where high-density commercial areas should be located.
- Center for the Study of Economics – an organization that has helped cities study and implement the land value tax policy option. They have an excellent section of their site devoted to Explaining Land Value Taxation – from the basic to the the finer details.
- Read "Outlandish Taxes?" by Pam Neary, published in the Summer 1999 issue of The New Rules Journal.
- Read popular author James Howard Kunstler’s take on the subject of land-value taxation
- Lincoln Institute of Land Policy –a center for research on land value taxation and related issues